11/13/2023 | News release | Distributed by Public on 11/13/2023 11:30
Emissions intensity measurements are meant to provide a way for firms to compete, and win, business or investment because they've found a way to make products in a way that has less of a climate impact. But the vagaries of reporting may mean that reported emissions intensity are actually misleading.
We used the Verdantix Climate Benchmark to compare the emissions intensities of 11 of the largest software firms in the world. Of the 10 that disclosed emissions per unit revenue, half reported between 2 and 10 tCO2e per million dollars. Three reported less than 1 tCO2e per million dollars. At the other extreme, one firm reported over 80 tCO2e per million dollars (see Figure 1). Six corporates disclosed emissions per employee, with four reporting less than 1 tCO2e per employee. The remaining two reported between 10 and 15 tCO2e per employee (see Figure 2).
From these data, several key insights emerge:
As with any analysis, the quality and consistency of the data is key. Here, we have evidence that the completeness of climate risk disclosures can affect and distort conclusions. Fundamentally, investors and analysts cannot compare firms' climate performance without first benchmarking and validating the disclosures themselves, as variability in how disclosures are calculated throws off results.
Challenges in comparability are proving endemic to climate data. Like our analysis, a study by the University of Oxford's Sustainable Finance Group found that heterogeneous carbon accounting data was throwing off financial firms' emissions estimates.
The big takeaway here is that climate leaders and investors need to build up their climate data validation capabilities in order to move from apples-to-oranges comparisons to apples-to-apples.
Emma is a Senior Analyst in the Verdantix Net Zero & Climate Risk research practice. Her current research agenda focuses on climate risk and resilience. She has a background in simulation and statistical modelling applied to climate adaptation, coastal management, and international development. She holds a PhD in systems engineering from Dartmouth College and a BA from Bowdoin College.